RETAILER HETEROGENEITY IN OPTIMAL INFLATION IN KAZAKHSTAN

Abstract

This paper studies the retailer heterogeneity in optimal inflation in Kazakhstan. Adam and Weber's (2022) relative price trend model is applied to AC Nielsen Urban Kazakhstan data for the 2019-2022 period. The results highlight significant variations in optimal rates across outlets, varying from -0.79 to 2.13%, suggesting the importance of retailers in estimating the national-level inflation rate. Also, the paper calculated national-level inflation in two ways: 1) by aggregating prices using equal weights for outlets and 2) by aggregating scanner data by weighting prices using product categories' expenditure weights for given outlets. Two approaches generate 4.9% and 1.6% optimal rate, respectively. This shows the importance of accounting for the expenditure weights of retailers in tailoring optimal inflation, and a uniform target may only partially capture pricing behavior across outlets.